Investment Commentary – May 16th, 2017

Market Indices as of Market Close May 16th, 2017
Dow 20,979 (6.14% YTD)
S&P 2,400 (7.069% YTD)
NASDAQ 6,169 (13.70% YTD)
Gold $1,236 (6.84%)
Oil $48.61 (-13.93%)
US 10Y Treasury 2.327 (-11.80%)
Barclay Bond Aggregate (1.57% YTD)

S&P 500 ends flat; retail earnings mixed

The S&P 500 and the Dow ended Tuesday’s session flat after a mixed set of economic data and retail earnings, while the Nasdaq hit another record closing high with help from technology stocks.

Based on the latest available data, the Dow Jones Industrial Average .DJI fell 2.26 points, or 0.01 percent, to 20,979.68, the S&P 500 .SPX lost 1.65 points, or 0.07 percent, to 2,400.67 and the Nasdaq Composite .IXIC added 20.20 points, or 0.33 percent, to 6,169.87.

U.S. Industrial Production Rises Most in More Than Three Years

The jump in U.S. manufacturing was broad-based and included the largest surge motor vehicles and parts production since July 2015, according to the Fed. Output also picked up for consumer goods and business equipment, two sources of strength for the economy. With brighter global growth prospects, signs that businesses are more open to investment, and a firm labor market that’s underpinning consumer demand, output may stay strong in coming months.

Market-moving headlines:

INFLATION INDICATORS: The U.S. government on Wednesday reported that prices of imported goods climbed 4.1% in April, extending the string of monthly gains to five, the government reported on Wednesday. Analysts suggested that positive global economic momentum could be putting upward pressure on U.S. inflation. However, later in the week, a monthly measure of U.S. consumer prices rose just 1.9%, slightly below expectations.

YIELD VOLATILITY: The yield of the 10-year U.S. Treasury bond rose on Tuesday to close at 2.42%, the highest level in more than a month. Yields retreated later in the week as inflation concerns eased.

YIELD INVERSION: China’s bond market left some analysts puzzled on Thursday, as the yield on longer-term Chinese government debt fell below the yield on shorter-term debt. Such a yield inversion is a rare occurrence that typically reflects pessimism about long-term economic growth and inflation prospects.

RETAIL PRESSURE: Weak quarterly results from selected U.S. retailers weighed on the broader stock market on Thursday, although an industrywide retail report on Friday showed that sales momentum began to shift entering the spring. Sales rose 0.4% in April, and the government adjusted its March sales estimate upward.

OIL OUTLOOK: The OPEC consortium of major oil-exporting countries boosted its forecast of oil production by non-OPEC countries, based in part on higher-than-expected U.S. production. Despite the forecast, oil prices rose for the week as U.S. oil storage levels declined.

Leaders this past week include Basic Materials and Technology. Laggards include Industrial Goods and Services.

On this day in 1792, twenty-four traders met under a buttonwood tree in lower Manhattan to work out rules and regulations for the speculative market. The modest two-sentence agreement gave birth to the New York Stock Exchange. Today the New York Stock Exchange is the largest forum for the trading of stock and bonds in the world.

The views presented are not intended to be relied on as a forecast, research or investment advice and are the opinions of the sources cited and are subject to change based on subsequent developments. They are not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investments.